Now that Year 2021 has come to a close, are you looking for ways to make your company operate better than ever in 2022? Yes, it is important to declutter your office, shred and recycle old client reports that are no longer needed, and do an inventory check, but have you thought about your enterprise’s financial health? It is absolutely critical to clean up your business’s finances and ensure that all of the accounting is accurate and up-to-date.
Taking a good look into your company’s accounting could help you think of new ways to cut unnecessary costs, generate more profits, and improve your overall financial health. This in turn will help you enhance your business’s success and ensure it stays prosperous in the long run. That said, check out these must-know tips on ways to clean up and improve your business’s accounting.
Finalize Journal Entries
As an entrepreneur, you are well aware of how vital it is to document all of your company’s daily transactions. Bookkeepers use journal entries to book many of these entries. Doing this helps you keep track of your business purchases, sales, client invoices, and payroll, which gives you a clear overall depiction of your enterprise’s financial standing. Thus, take the time to meet with your bookkeeper and review/record any pending accrual/deferral journal entries. Recording backlogged entries will provide more accurate financials so that you can make more informed decisions and better safeguard against any unforeseen financial issues.
Document Your Receipts
Do you sometimes take your clients out to dinner to discuss business projects and plans? Do you have to regularly ship products to customers and make frequent office supply purchases? If so, make sure that every single receipt is accounted for and properly documented. In the event of a business audit, proper record keeping and documentation will make the whole process go a lot smoother. Taking initiative by recording your receipts could save you a lot of unneeded stress later down the line!
Check the Profit & Loss and Balance Sheet Statements
It is pertinent to review your business’s Profit & Loss and Balance Sheet statements to verify that all entries were booked correctly. Sometimes, we can be in a rush and accidentally record transactions in the wrong general ledger account. This mistake can create inaccurate financial statements, which can later create challenges during the next tax season. With this in mind, take the time to review your enterprise’s financial statements to keep all transactions accurate. You cannot skip this step!
In order to keep your company’s financials in order, perform bank reconciliations for each month. Conducting bank reconciliations will keep your bank balances in order and ensure that every transaction is accounted for. In doing this, you may find that you were charged twice for a company purchase or there is still an outstanding invoice that needs to be paid.
Examine Your Budget Versus Actual Expenses
While cleaning up your business’s finances, analyze your budget versus actual expenses and take corrective action where there are large variances. You may find that you no longer need monthly subscriptions to certain software platforms, excess file storage, and other expenses that eat away at your bottom line. Understanding the variances between budget versus actual expenditures will help you take corrective action in future periods. This in turn will improve your overall financial decision-making.
Close Your Monthly Financials
To properly balance your business’s checkbook, close your monthly financials up to the most recent month. If you don’t keep up-to-date financial statements, you will run your company blindly and be completely unaware of any possible financial issues. Having up-to-date financials provides relevant information to you and other key decision makers in your company so that you can keep progressing into new levels of success.
To Wrap it All Up
As a business owner, you must have a solid grasp of your company’s financial health in order to make the best decisions you can. Therefore, clean up your enterprise’s financials by finalizing journal entries, documenting all receipts for expenditures, and reviewing your Profit & Loss and Balance Sheet statements. Also, make sure to perform bank reconciliations, examine your budget versus actual expenses, and close your monthly financials. Taking all of these steps will help ensure the long-term growth and prosperity of your business. For startups with a budget, it is recommended to outsource or hire internally a professional bookkeeper to ensure all of the above points are maintained on a monthly basis.
For more finance tips for your business, check out this helpful blog post.
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